Economics of Selling Online

Good news! According to comScore.com, Cyber Monday sales were up 15% over last year. In fact, spending for the holiday shopping weekend appears to have gone up 12% over last year, according to the survey. This increase helps recapture some of the overall loss on the month. Prior to the Thanksgiving-Cyber Monday shopping spree, online sales were down 4% on the month. The month, including December 1, will wrap up with only a 2% decline. This is still a seven month disappointing downward trend in online sales.

Nielson.com provides a similar Cyber Monday picture. While they do not report actual sales, they report that Cyber Monday generated a 10% increase in Web traffic. Nielson calculates the Holiday eShopping Index. The Holiday eShopping index is based on a survey of 120 representative online retailers, and traffic to these cites represents a barometer of online activity.

Interestingly, beauty was the fastest growing product category in the index on Cyber Monday 2008 with a unique audience growth of 151%. (This is a stark change from Black Friday’s traffic leader of consumer electronics at 219%.) This was followed by toys/videogames with a unique audience growth of 112%. Of the top 10 online retail destinations, Amazon, Sears, Best Buy and Netflix showed the most traffic growth (25%, 58%, 51%, and 42%, respectively) over Cyber Monday 2007, while Wal-Mart saw 0% and eBay saw a 2% decline in traffic. Just four days earlier on Black Friday, the top destinations were Wal-Mart, 106%, Target, 136%, Best Buy, 196%, and Circuit City, 352%.

Another index to watch during holiday shopping is Chase’s Paymentech Pulse Index. It paints quite a different picture for Cyber Monday. This index monitors the daily activity of 25 of the largest 150 Internet retailers through data taken from actual “transactions crossing Chase Paymentech’s global processing platform”. This index tells us that on Cyber Monday 2008 sales volume increased by less than 1/2% from last year, but transaction counts were up 14%. Essentially this means that while more transactions were made, much less was spent per transaction than in the previous year. In fact, the average dollar spent per transaction was down 12 percent.

Data Sources:

“Welcome to the 2008 Chase Paymentech Pulse Index: What will this year’s online holiday shopping bring?” http://pulse.chasepaymentech.com/

News Release: CYBER MONDAY DRIVES 10 PERCENT INCREASE IN WEB TRAFFIC TO ONLINE SHOPPING SITES, ACCORDING TO NIELSEN ONLINE, Michelle McGiboney, Nielson Online, December 2, 2008.

News Release: DESPITE CHALLENGING ECONOMY, BLACK FRIDAY TRAFFIC TO ONLINE SHOPPING SITES GROWS 10 PERCENT YEAR OVER YEAR, ACCORDING TO NIELSEN ONLINE, Michelle McGiboney, Nielson Online, December 1, 2008

Press Release: http://www.comscore.com/press/release.asp?press=2607, E-Commerce Spending Jumps 15 Percent on Cyber Monday to $846 Million, the Second Heaviest Online Spending Day on Record, December 3, 2008

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Welcome to the Economics of Selling Online blog. What will make this blog different than other e-commerce information sites? The major difference is that I am first and foremost an economics professor. I develop a few sites online because I am inquisitive and I want to understand what I teach. Thus, the profit motive is much lower for me than for a company that sells web design. Well… At least it is until I am good enough to make more money at web design than I do as a professor. (That is called “opportunity cost” - one of the first concepts economics students learn to use.) However, my few clients can rest assured that their sites will receive my full attention to help make them successful or I wouldn’t be very credible in my teaching of the subject…

At the current time, my strengths lie in teaching and writing, so I will use these strengths to develop an online presence for myself as well - whatever it may be. This site will be a process of discovery. Since it is designed to supplement a course in the economics of e-commerce, it will develop over time. I will be moving through different topics as the course continues, so the focus of the blog will change over the course of the semester. However, when I teach a course, I want my students to come away with news they can use beyond the end of the semester. My focus will be on providing applicable tips along with economics analysis.

So join the journey with us and learn a few economic principles along the way. In the process, perhaps you will take away some tips that your web developer or designer may not tell you.

Note: My students will be developing simple sites as well. So I will be tracking the use of this blog as an example to them. On Day 1 this site is not found or linked yet anywhere on the net - as expected… Google Analytics has been added on this day.